Evidence of Cheating Investigated in Securities License Exams

July 10, 1996

NEW YORK (AP) _ Authorities are examining evidence that some securities brokers paid other people to take their licensing exams.

One broker paid $2,500 to pass the National Association of Securities Dealers Series 7 test that covers rules and regulations governing securities transactions, Martin Kuperberg, head of the NASD’s New York office, said today.

Kuperberg said some brokers have offered to settle, but he said he would only accept permanent bans from the industry, not just until they passed the exam.

Cheating has also been found on the Series 63 exam, which is administered for state securities regulators and covers state law.

The investigation targets a ``substantial″ number of people, Kuperberg said, but he would not be specific. He also declined to say if they include licensed stockbrokers who accepted money to take the test for others, but said such brokers would be sanctioned if they were discovered.

Results of the investigation are expected to be announced in the next four to six weeks, Kuperberg said.

Some of those alleged to have cheated the system have been working for brokerage houses for more than a year, Kuperberg said.

Kuperberg did not identify the brokers or their firms, but said the dealers work for small- and medium-sized firms.

Firms that hired the unlicensed brokers could face lawsuits from investors and the cheaters face possible criminal and administrative charges.

The investigation so far is focusing on the New York area and includes brokers who were licensed as long as two years ago. Kuperberg would not comment today on whether the investigation would expand outside of New York.

The Series 7 exam lasts up to six hours. About 130,000 people took the test nationwide last year and about 71 percent of them passed.

To stop the cheating, NASD started fingerprinting test takers earlier this year. Officials said they also plan to begin videotaping test takers this fall.